Strong PMIs as Signs of UK Economic Pick Up?
Britain's economy slowed sharply in the first three months of this year. The slowdown caused the Bank of England to postpone raising rates in May. But the central bank said then that if growth recovered, rates were likely to rise for only the second time in more than a decade as part of a gradual move away from the emergency stimulus program it rolled out during the financial crisis. The UK central bank has forecast 0.4% GDP growth for the second quarter and it also expects inflation to pick up in the coming months due to higher oil prices.
After a weak start to 2018, the IHS Markit/CIPS services Purchasing Managers' Index (PMI) unexpectedly rose to an eight-month high of 55.1 in June, beating economists' average forecast of 54.0. Similar surveys this week for the smaller manufacturing and construction sectors also beat expectations.
UK manufacturing PMI unexpectedly rose to a level of 54.4 in June, defying market expectations for a fall to a level of 54.0. Business activity in Britain’s construction sector also surprised the markets. UK construction PMI increased to 53.1 in June, up from 52.5 seen in May and much better than a reading of 52.5 expected.